In middle school, I took a class in home economics that taught me skills to run a household like a tight ship. I learned to sew (a sweatshirt) and cook (using baking soda when I should have used baking powder). My teacher, Mrs. Phelps, knew a lot about managing a high intensity household as her future Olympic champion son, Michael was only in elementary school himself.
In the years after I moved on from her class, I can only imagine what it was like for Debbie Phelps to manage the economics of a home with such extraordinary internal catalysts: Michael’s ADHD diagnosis and struggles in school, his willful pursuit of excellence in the pool, and the logistics of training far from home at the North Baltimore Aquatic Club. Mrs. Phelps knew what it meant to make economic decisions and value-based decisions while on a path to raising a son who would become one of the greatest athletes in generations.
Home Economics Spotlight
Now, seven months into a pandemic, the economics of our homes are in sharp focus. This time, it’s not about cooking and sewing. It’s about how to keep up momentum, manage our finances, and make good decisions about money in the midst of uncertainty. Home economics is not about making more money. It is about trade-offs. How does the money you have support the best version of your life? Both your needs and your wants.
Your investment portfolio may have recovered from this year’s market drop. You may still have job stability and your income may not have changed. But I am willing to bet that you feel something is still missing. So, let’s not focus on what the market is doing or how much is in your 401(k). The economic health of your home is about your return on life, not your return on investment.
Financial balance in a family is like riding a bike. Starting out we are wobbly, accumulating debt from college or a first home, before we pick up speed. As careers progress, we gain stability by accumulating assets and paying down debt. But what happens on a bicycle if we slow down too much or stop? We lose our balance. That is how this pandemic feels for so many people. It is a loss of momentum or even a full stop that has pushed families off balance.
Finding Financial Balance
We have been working with investors on regaining momentum and finding financial balance in these extraordinary times. By utilizing a simple yet powerful assessment tool, we look at your life-balance including work, home, relationships, finances, and more. Aptly named the Return on Life Index (ROL Index), this tool measures life satisfaction in three key areas to determine if you are getting the best life possible with the money you have:
- Well-Being: measures your return on leisure, health, and relationships.
- Progress: measures your return on work, residence, achievement, and learning.
- Freedom: measures your return on purpose, autonomy, and security.
Depending on the response to this short assessment, you are able to identify aspects of life where the quality could be better. It may help identify how to use your wealth to improve life for you and your family.
As financial advisors we should be more comfortable having these conversations with clients. If we hang our hat on market performance, then we are coaching the families we serve to focus on the things that are out of their control. This is a shift of focus from return on investment to return on life.
Learn more about your Return on Life
Financial balance is about how we value what we own, our relationships, and our experiences. It is not about to what our brokerage account is worth. If you are feeling as though conversations about market volatility are missing the mark, talk to an advisor who is comfortable asking the question “How are you doing, really?” The silver lining of 2020 is that your situation may have added clarity to who and what you value most. Now would be a good time to align your finances with that best version of your life.
When we emphasize Return on Life, we learn how we can use wealth to support the best life possible.